The House Finance Committee has approved a $9.97 billion budget for the 2020 fiscal year that largely avoids new taxes while strengthening education, continuing the car-tax phase-out and maintaining municipal aid, while also closing a $200 million budget gap.

“This is definitely a pro-business, pro-consumer budget that reflects our commitment to operate within our state’s means. We are fully funding the essential programs our state provides to its citizens, particularly education, and keeping our commitments without instituting new taxes or plunging our state into unjustifiable debt. This budget is balanced and sound, and will help Rhode Island continue to move forward in the coming year,” said House Speaker Nicholas A. Mattiello (D-Dist. 15, Cranston)

Said House Finance Committee Chairman Marvin L. Abney (D-Dist. 73, Newport, Middletown), “As with any legislative session, the state budget is perhaps the most important bill that comes before the General Assembly because it affects every single resident of Rhode Island.  The House Finance Committee has spent countless hours vetting and hearing testimony on the governor’s budget proposal.  We have faced numerous hard decisions when formulating this budget, and I am proud of the work that has been accomplished. I believe that this budget will serve the people of Rhode Island fairly while also keeping our economy stable and strong for the future to come.”

The bill (2019-H 5151A), which is scheduled to be brought before the full House for a vote June 21, restores full funding for the third year of the phase-out of the automobile excise tax, a program instituted through legislation sponsored by Speaker Mattiello. In the budget she submitted to legislators earlier in the year, the governor had proposed slowing down the phase-out, which is set to be complete after 2023.

The committee did not include the governor’s proposal to institute a new fee on large businesses whose employees are enrolled in Medicaid programs, nor did it include her proposal to expand the sales tax to include lobbying services, design services and commercial building contracts for services like cleaning and landscaping. It also declined to increase the hotel tax and didn’t include a new excise tax on firearms and ammunition. The committee did let one part of her sales tax expansion stand: digital downloads and streaming services like Netflix will be subject to the sales tax under the version approved by the committee.

The committee added the elimination of the “tampon tax” to the budget, agreeing to make feminine hygiene products exempt from sales tax, a proposal originally put forth in separate legislation (2019-H 53072019-S 0049) by Rep. Edith H. Ajello (D-Dist. 1, Providence) and Sen. Louis P. DiPalma (D-Dist. 12, Middletown, Little Compton, Tiverton, Newport). Of the 45 U.S. states that collect sales tax, 10, including Massachusetts, Connecticut, New York and New Jersey, currently exempt feminine hygiene products. The committee also added urns to the list of funeral items that are tax exempt, as proposed in a separate bill (2019-H 51572019-S 0054) sponsored by Rep. Arthur J. Corvese (D-Dist. 55, North Providence) and Sen. Frank S. Lombardi (D-Dist. 26, Cranston). All tax changes would take effect Oct. 1.

The committee added House Majority Leader K. Joseph Shekarchi’s (D-Dist. 23, Warwick) proposal (2019-H 5576) to provide a work-around for owners of “pass-through” entities whose state and local taxes exceed the new $10,000 cap on the state and local tax (SALT) deduction on their federal tax returns, instituted under the changes to the federal tax codes passed by Congress in December 2017. The change will allow pass-through entities, such as limited liability companies (LLCs), S corps, partnerships and sole proprietorships, to pay the state tax on their business income, instead of passing it along to their partners to claim on their personal income tax returns. Based legislation enacted in Connecticut, it is expected to be revenue-neutral for the state.

The committee rejected the proposal to increase the cigarette tax by 25 cents per pack and 30 cents on cigars, based on the impacts on small businesses, particularly border-town convenience stores who also benefit from sales of other products to people who come in to buy tobacco products.

While the committee kept the governor’s proposed increases to campsite fees at state parks to fund park and beach maintenance, it rejected an increase in beach parking fees.

The committee left economic development programs largely the same as they are in the current year, but set some new limits on the Rebuild RI economic development program.

The committee included legislation (2019-S-803Aaa) sponsored by Senate President Dominick J. Ruggerio (D-Dist. 4, North Providence, Providence) and passed by the Senate this week to establish a process for creating Special Economic Development Districts on state-owned tracts of 20 or more contiguous acres at their inception that are not owned or controlled by the Department of Environmental Management. The bill was triggered by delays and impediments imposed upon the Hope Point Tower proposal for the I-195 Redevelopment District. The special districts would be vested with authority to adopt development plans that include land use, location of buildings, street systems, dimension and height requirements, parking, landscaping, design review and population density.

The bill fully funds the state’s education aid formula, increasing direct aid by $34.4 million over the current year’s amount. The committee granted the governor’s request for $5 million for more support for English language learners, and much of her request for additional pre-kindergarten classrooms, adding $2.9 million for another 270 seats to the 1,080 that are currently funded, with expansion targeted toward the neediest families. All told, $14.9 million in general revenues will go toward high-quality pre-K.

The committee also added an additional $640,000 in funding for the Department of Education to help with education reforms.

While the committee did not concur with the governor’s proposal to expand the Rhode Island Promise program, it did fully fund the program as it stands, providing graduating high schoolers with two free years at the Community College of Rhode Island.

The committee added to the budget the proposal to establish a 17-member board of directors for the University of Rhode Island, providing it a governance structure similar to those of other public universities. URI is currently under the auspices of the state Council on Post-Secondary Education, which also oversees Rhode Island College and CCRI. The change was proposed in separate legislation (2019-H 6180) introduced by Speaker Mattiello.

The committee restored proposed cuts to health care. The committee rejected the proposed freeze on hospital reimbursement rates, and kept the proposal for a 1-percent rate increase to nursing home facilities, and kept in the modest wage hike for direct care workers who serve people with developmental disabilities.

The committee also added Senate President Ruggerio’s proposed Opioid Stewardship Act (2019-S 0798) to establish a restricted receipt account for $5 million to fund opioid treatment, recovery, prevention and education services funded by an assessment to manufacturers and distributors on opioid products sold or distributed in Rhode Island, with exemptions for those used for hospice care, addiction treatment and epidurals.

The committee also restored cuts to municipal aid, rejecting the governor’s cuts to both the excise tax phase-out and the payment in lieu of taxes program (PILOT) that reimburses municipalities for some of the taxes they lose out on from untaxed nonprofits in their community. Those changes restored $21.5 million in municipal aid.

The bill does not include the governor’s proposal to legalize recreational marijuana, although the committee did include authorization of six more compassion centers, in addition to the three existing ones, to sell medical marijuana. As part of the expansion, the committee increased the licensing fees for new centers to $500,000 each. It rejected the governor’s new restrictions on homegrown medical marijuana.

The committee added $220,000 in funding to help train E911 operators to better provide CPR instruction to callers while they await emergency responders, and established restricted receipts accounts for E911 surcharge fees on phone bills. To comply with federal requirements, the surcharges on phone bills will be split into two separate charges, one to support E911 operations and another for funding other public safety needs. Both will go into restricted receipt accounts.

The committee did not include funding for renovations to the “Super Max” prison facility.

It also increased “complete count” funding related to the upcoming census, from $150,000 in the governor’s proposal to $300,000.

The committee also added approval of up to $200 million in GARVEE bonds that will allow Rhode Island to take advantage of current low interest rates to fund the reconstruction of the viaduct that carries Route 95 north though downtown Providence. Grant Anticipation Revenue Vehicle (GARVEE) bonds are a common funding mechanism that allows the state to begin highway projects in anticipation of receipt of federal funds. Last month, the Senate approved separate legislation (2019-S 0633A) sponsored by Senate Majority Whip Maryellen Goodwin (D-Dist. 1, Providence) to authorize the same bonds. House Majority Whip John G. Edwards (D-Dist. 70, Tiverton, Portsmouth) sponsored the bill (2019-H 5883) in the House.

The committee did not concur with the governor’s plan to once again put off the reissuance of license plates, which is required by law. The budget would start replacing current license plates with a new design upon the renewal of registration, with a fee of $8 per vehicle, a $2 increase.

The committee also reduced from $10 million to $5 million in savings the state must identify in unspecified efficiencies over the course of the year. It also added statutes requiring more transparent reporting of overspending by state agencies and expanded the auditor general’s authority. It also achieved savings by eliminating vacant positions throughout state government.

The committee did not include a proposal to increase the minimum wage from $10.50 to $11.10 next year. The General Assembly has increased the minimum wage in six of the last seven years.

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